Last Updated on Thursday, 5 September, 2024 at 9:09 am by Andre Camilleri
The summer recess seems to be over for the European institutions. I began seeing several photos of European parliamentarians, as well as diplomats on social media. Undoubtedly, the most prominent photos this week were of the incumbent European Commission President at the BLOBSEC Forum in Prague.
Addressing the GLOBSEC Forum, last week, President Ursula von der Leyen resorted to the usual rhetoric. The President of the European Commission said that we are blaming the war, not on the invader, but on the invaded. Hello! Let’s for a while forget Putin and Zelensky. True, Ukraine was invaded, and we must blame Putin for invading Ukraine, and not the other way round. Here, I was always consistent, and I constantly condemned the invasion. What I always found problematic though, was the fact, that the divisive political narrative of Ursula vis-à-vis Vladimir Putin was never applied on Ilham Aliyev, for the equivalent arms aggression, in the disputed territory of Nagorno-Karabakh. Sometimes, I truly have to scroll back to see the syntax of the reporting and read between the lines. Sincerely, I get the impression that what we are allowed to consume, in terms of media reporting, is somehow lost in obfuscation.
When the President of the European Commission travelled to Baku in 2022, to meet with her reliable partners, we got to know about it through the social media platform Twitter, now known as X. However, when Aliyev literally cleansed Armenians from Nagorno-Karabakh, von der Leyen kept mum. Same goes when von der Leyen visited Israel. The blessing of that visit claimed thousands of lives, without her issuing any statements. We do blame the radical group Hamas for the war, but we also blame those who blessed it. Have you ever heard von der Leyen coming out against Benjamin Netanyahu’s disproportionate force in Gaza, similar to the war in Ukraine? Probably, not. Have you ever heard von der Leyen condemning what Aliyev was doing in Nagorno-Karabakh and the ethnic cleansing of Armenians, similar to Donbas? Probably, not.
Hence, my conclusion points always to the same direction. von der Leyen’s impulsivity towards the Russians, is either cultural or indoctrination from her father. Also, during the GLOBSEC Forum in Prague, President von der Leyen resorted once again to the usual nauseating rhetoric of peace illusion. I tend to disagree. In reality, peace was never achieved, even after the second world war. Peace and prosperity were only achieved for a few individual member states. The East was left knocking for help behind the iron curtain. It took them years to achieve freedom and peace. Really and truly, only some countries achieved peace and freedom, and it was reinforced through economic prosperity
The EU was founded as a peace project. The EU was never founded as a security project, or a security provider, but as an economic project. We had other multilateral institutions taking care of security. It was economic prosperity that was shared between a limited number of member states that further guaranteed security. This is the raison d’être of the EU. Security can never thrive in an unstable economic environment because economic instability proliferates conflicts. And Putin knows this, quite well. This is the reason why I kept insisting that diplomatic channels are kept open. Personally, I do not agree with what is being proposed, especially the overhaul of the EU’s defence and security policy. True, Europeans have been on the guard for decades now. However, the guard was to create economic wealth and not to transform the EU into a security project.
Meanwhile, the former president of the European Central Bank, Mario Draghi, joined the chorus. The former president was expected to present the EU competitiveness report, in confidence, to the European Parliament political groups yesterday. Politico Europe reported that the report contains suggestions to reduce red tape for EU firms in order to boost military production. Frankly, Draghi is telling everyone to shove governance at everyone’s face for military production. Also, it is seemingly proposed that defence companies within the EU get eligibility to access EU money in full, which means, that the Treaty must change; the EU Budget within the MFF does not allow it. And we must discard competition for monopolies because the report entails suggestions to allow mergers, irrespective of competition concerns and market dominance.
Pardon me? Technically, he might be correct from an economic theory point of view. However, politically it is sending the wrong message. In the theory of the firm, monopolies seem to provide research and innovation under Schumpeter’s economic doctrine, while perfect competition does not. This is the economic ideology of Schumpeter found in his book, Capitalism, Socialism and Democracy. He argued that some degree of monopoly is preferable to perfect competition. Schumpeter explained that capitalism fuels entrepreneurship. He came up with the process of creative destruction, which would keep innovation alive, by discarding old inventories, technologies and equipment. Indeed, the defence industry in the EU requires such mergers to innovate, and optimise the long run average cost, which under a monopoly power, provides lower costs relative to perfect competition due to a shift in the long run average cost curve. However, here we are seeing a complete shift in the EU’s economic and political ideology. Whereas we have in place the competition law, and market dominance in checks for businesses, for the defence industry it might be totally waved. They need it to enhance additional skills and reinforce invention.
What struck me from the preliminary reporting is that a former president of the ECB, might be advising to open the EIB’s lending to defence companies, while revising the EU Sustainable Finance package which includes ESG. Unless the ESG criteria are revised the idea of investing will not be attained. The reason is that bankers and impact investors are considering the ESG criteria when investing money. Under the SFDR a company is required to identify principal adverse sustainability impacts and indicators. Asset and Wealth managers are excluding, under the Principles Adverse Impact, companies that trade in controversial weapons, which negatively scores the S under ESG. This is exactly the opposite of what we are currently doing in the financial and banking industry.
In fact, prior to leaving the Political and Security Committee, I had a word with the chief Executive officer of the EDA in the Europa Building about the ESG criteria. I told him that there can’t be investments in this area, due to ESG criteria. I knew because it was my upcoming job within the banking industry. Three years down the line, I can say, that I was correct. My appeal to von der Leyen is to look into the financial stability report of May, where it is outlining a risk to transit to greener practices due to the lack of government finances forgone for defence spending. Perhaps, they might consider another report of an Italian, the Monti Report. So we will be having the Draghi Report on Competitiveness and the Monti Report on additional revenue, Own Resource, for the EU.
Good luck with reversing everything and with the concept of achieving sustainability!
